SINGAPORE, Oct 8 (Reuters) – Vietnam has weathered the global economic crisis relatively well, but the country is still seen as a risky and relatively opaque investment destination.

Following is a summary of key Vietnam risks to watch:

* CORRUPTION

Corruption is endemic in Vietnam at all levels of government, and acts as a major barrier to foreign investment. The authorities had announced aggressive plans to fight corruption, and encouraged the media to act as a watchdog, but these efforts lost steam after several journalists were detained for reporting on major corruption scandals. Progress on corruption will remain a key determinant of investment attractiveness.

Corruption, lack of accountability and transparency, and burdensome bureaucracy all impact the effectiveness of the government in formulating and implementing policy. Economic reform and the restructuring of inefficient state enterprises are vulnerable to being undermined by entrenched interests and conservative elements in the government more focused on security.

Key issues to watch:

— While the government stimulus package has boosted the economy, there are questions over how the budget deficit can be financed, how inflationary pressure can be contained, and how the crowding out of private investment can be avoided. Hanoi has embarked on a plan to trim bureaucratic procedures in government, and how that scheme plays out will be something to watch.

— Investors frequently list poor infrastructure as one of the biggest barriers in Vietnam, and the government’s ability to coordinate swift, efficient development in this area is being keenly observed.

* EXCHANGE RATE POLICY

Vietnam’s fixed exchange rate policy frequently causes economic pressures to build. The authorities are widely expected to widen the dong’s trading band or devalue it again gradually in coming months, and this has prompted hoarding of dollars. For now, the risk of a sudden big devaluation is considered small.

Key issues to watch:

— Markets are closely watching for any clues to the likelihood and timing of changes to the exchange rate.

* SOCIAL UNREST

Vietnam has seen a rising number of strikes, protests and land disputes, often affecting foreign businesses. Disturbances have erupted in rural areas due to state expropriations of land and the corruption of local officials. But there remains no evidence for now that wider unrest is likely, or that there is any imminent risk of the regime being challenged from below.

Key issues to watch:

— Any sign that a broader national protest movement is emerging out of local disputes. So far, this seems unlikely.

— The role of the Catholic church. Catholics have been engaging in periodic protests over church land taken over by the government after 1954. The Catholic Church, while officially shunning involvement in politics, has 6-7 million followers in Vietnam and is quite well organised.

— Territorial disputes in the South China Sea. This issue is highly charged in Vietnam, where suspicion of China runs high. Any move by China to assert sovereignty over disputed islands in the South China Sea, or perceived weakness by Vietnam on this issue, could galvanise broad based support for demonstrations.

* THE ENVIRONMENT

Vietnam has great potential as a source of tradeable carbon credits under the Kyoto Protocol, but issues of expertise, transparency and financing have hindered progress. Environmental issues may also become a growing source of popular unrest, as in China. With its huge coastline, Vietnam is recognised as one of the countries that will be hardest hit by rising sea levels, particularly in the rice-growing Mekong Delta.

Key issues to watch:

— The extent to which the government manages to limit the environmental damage from Vietnam’s economic growth.

— Any evidence that extreme weather events affecting Vietnam are becoming more frequent as a result of climate change.

(Compiled by Andrew Marshall and John Ruwitch; Editing by Bill Tarrant)

By SETH MYDANS
THUONG TIN, VIETNAM — Looking out across his green rice fields, Nguyen Van Truong can take pride in hedging his bets when he joined the global marketplace more than a decade ago and began to make money.

When Vietnam began a tentative engagement with the world economy in the mid-1990s, Mr. Truong was one of the first people to see profit in his local craft, embroidery, and he joined with other villagers in marketing it for export and domestic sales.

As hundreds, and then thousands, of farming villages began organizing themselves to sell their traditional crafts — like lacquerware, textiles, straw mats, noodles, fans and incense — they came to symbolize Vietnam’s eager embrace of capitalism after a ruinous postwar period of Communist restrictions on free enterprise.

Some villages, like Thuong Tin, on the rural outskirts of Hanoi, now resemble tiny cities in the midst of the rice fields with three- and sometimes four-story houses clustered along small concrete roadways.

Exports of handicrafts, many of them from village enterprises, earned $1 billion last year, according to official figures.

Now things have changed, both on Wall Street and in the little village of Thuong Tin.

As the world economy contracts and markets disappear, crafts villages like this have become an object lesson in the difficulties and the risks of joining the global marketplace.

Most of the 3,000 crafts villages scattered around the country are in trouble, said Luu Duy Dan, vice chairman of the Vietnam Association of Crafts Villages. Only 30 percent of them are operating normally, he said, and, if nothing changes by the end of the year, half of them will have collapsed entirely, with a loss of some five million jobs.

“Since late 2008, crafts villages have faced so many difficulties caused by impacts of the global economic decline, such as a lack of capital and production materials and a shrinking consumer market,” Mr. Dan said.

“It’s not so simple to join the world economy. It’s complicated. It’s not easy. We should have more coordination and better standards.”

Many villages are already bankrupt, according to the Ministry of Agriculture, including villages that made pottery, ceramics, shoes and high-quality paper.

Unlike Mr. Truong, 76, many of these new capitalists abandoned their farms and now find themselves without an economic safety net. In many cases, they had no choice, squeezed off their land like many rural people by a widespread conversion of farmland for industrial enterprises.

Here in Thuong Tin, the embroiderers sell their work to Do Thanh Huong, whose family comes from the village and who organized their work in a collection of cooperatives.

Ms. Huong, who runs the Tan My fabric shop and Tan My Design clothing boutique in Hanoi as well as an export business, says she is continuing to place orders here to help the embroiderers bridge the downturn.

But she said her exports to Europe were down 60 percent and her wholesale customers in the United States had stopped buying altogether. Mr. Truong’s back rooms are stuffed with unsold tablecloths, napkins and pillow covers.

“When people don’t buy in New York, we feel the effects in the village here,” Ms. Huong said.

Even the biggest and most successful of the crafts villages are suffering, like Bat Trang, which has become famous for its pottery, Mr. Dan said. That village, near Hanoi, which once employed 8,200 workers in 800 small enterprises, has lost thousands of jobs, he said.

Many others are faltering because of a lack of experience in manufacturing or marketing, a shortage of capital and technology and the different import requirements of customer nations, Mr. Dan said.

Lien Minh, a senior official at the Ministry of Agriculture, told reporters in June that because of unplanned and haphazard development, 80 percent of crafts villages lacked the money to buy the equipment they needed.

In some ways, these difficulties reflect the broader challenges Vietnam faces as it adapts to the international marketplace. Its economic growth rate, which had been averaging about 8 percent a year, fell this year to a projected 4.5 percent by some estimates, the lowest in nearly two decades.

Vietnam suffered far less during the Asian economic crisis of 1997, when it was still largely isolated from the world economy.

After years of internal debate, Vietnam joined the World Trade Organization in January 2007, a step that required revisions of its legal infrastructure, banking system and regulations that are still causing pain as they are put into place.

Vietnam is still formulating its postwar identity, and there is a continuing tug between its cultural roots and the excitement of a modern future.

On a visit to Thuong Tin 13 years ago, when capitalism was still young in Vietnam, Ms. Huong had said: “I explain to them and explain to them, leave the fields and work only embroidery. That is how you get rich. But they say, ‘We are farmers. The field comes first.”’

So even during the boom years, ignoring her advice, most farmers here continued to work their fields, and the pace of needlework sometimes gave way to the seasonal demands of planting and reaping.

“Farming is what I live on; it’s how I feed my family,” Mr. Truong said. “If you farm, you have just enough food to eat.”

Embroidery has brought him the upward mobility that parallels his country’s emergence from the poverty of the war and postwar years.

When he stands on the roof patio of his new four-story home, he looks out over a miniature urban jungle that includes three large homes built by his sons, who are also embroiderers.

Just beyond them, the rice fields stretch into the distance, lush and still as their crop matures. Soon it will be ripe, and the people of Thuong Tin will head into the fields for the harvest.

Addressing a private economic forum in Tokyo, Dung also called for further aid and investment from regional powerhouses, particularly China, India, Japan, South Korea and Australia, to sustain growth in the rest of Asia.

He urged regional nations to continue coordinating their economic stimulus measures and boost trade and investment to maintain regional strength.

“Deeper regional integration and increased intra-regional linkages at different levels will be the key for Asia to be not only the first continent to overcome this crisis, but also to maintain its position as the world’s most important economic locomotive,” he said, speaking through a translator.

Although Asian nations, many of which rely on exports to the United States and Europe for growth, have been hit by the global financial crisis, intra-regional trade had softened its impact, he said.

Dung added that Vietnam would continue to restructure its economy, promote infrastructure programmes, push for administrative reforms, and put more emphasis on environmental protection.

In Vietnam, “we believe that the current crisis is… an opportunity to speed up restructuring, improve management and build the foundation for sustainable development,” he said.

Vietnam enjoyed 3.1 percent growth in the first quarter and expects five percent growth this year despite the global crisis, he said.

Despite the downturn, he said: “We believe that Vietnam will still be a dynamic economy and a reliable destination for investors.”

HANOI (AFP) — Vietnam has recorded its first cholera death during an outbreak that has spread to 11 out of 63 provinces and cities across the communist nation, the health ministry said on Tuesday.

The 50-year-old victim from northern Ninh Binh province died on May 12 a few hours after hospitalisation, said a Ministry of Health website report.

The victim was an alcoholic who tested positive for vibrio cholera bacteria. He had diarrhoea and serious dehydration, the ministry said.

It added that a total of 53 patients have been confirmed with cholera since April 20, while more than 500 others had acute diarrhoea.

In March and April last year the country battled cholera outbreaks which hit Hanoi, Ho Chi Minh City and 16 other provinces. More than 100 people were infected but no fatalities were reported.

Vietnam has a long standing problem with food safety and hygiene.

Authorities in Hanoi have temporarily closed at least a dozen dog slaughterhouses — where the popular meat is prepared — over fears their unhygienic conditions may help spread cholera bacteria to people, an official said Monday.

Cholera is an acute intestinal infection transmitted through water or food contaminated with the bacteria vibrio cholera. It causes diarrhoea and dehydration and can lead to kidney failure and death if untreated.

The World Health Organization (WHO) says cholera can be easily avoided through good hygiene, especially by washing hands with soap after using the toilet.

The WHO on Tuesday referred to a 2006 survey of rural sanitation that found only 12 percent of people washed their hands before eating, 15.5 percent washed after urinating, and 16.9 percent cleaned their hands after defecating. The survey was carried out by Vietnam’s Department of Preventative Medicine and Environment.

Bacteria from the faeces of a contaminated person are one of the main sources of cholera contamination, the WHO says.

As part of its joining the World Trade Organization two years ago, Vietnam’s food safety needs to adapt to international standards, WHO said.

“Coordination of activities to ensure safe practices into the entire food chain is a challenging task for Vietnam’s government,” it said.

HO CHI MINH CITY (AFP) — It is early evening and another night of singing has begun in earnest at Style Karaoke, a plush club where high-flyers in Vietnam’s commercial capital come to let off steam.

Music blasts from behind the glass doors of the small rooms where groups gather to sing and, as the rhythm takes hold, to dance.

And that, the communist government says, is the problem.

It wants to ban dancing at karaoke bars in what reports have said is a bid to limit drug use.

The Ministry of Culture, Sports and Tourism posted the proposed ban on its website last month and invited public comment on the move, its latest attempt to clamp down on lawlessness at the popular singing venues.

But at Style and other neon-lit clubs on Su Van Hanh street, the heart of karaoke entertainment in the city formerly known as Saigon, the proposal is dismissed as unworkable.

“I think it’s not feasible because these people who go to karaoke want to relieve their stress,” says Dang Duy Thanh, the gel-haired manager of Style.

“If we just force them to stay there singing without feeling comfortable, that’s not right”.

Tuyen, who five years ago warned that karaoke was linked to prostitution, was quoted by the VietnamNet news website last month as saying the drug ecstasy would be used in karaoke rooms if dancing was not banned.

“Ecstasy always goes with wine and music,” he said. “In my opinion, karaoke is a cultural activity which is always latent with social evils.”

Tuyen did not respond to AFP’s requests for an interview.

Ecstasy became popular around the world at “rave” dance parties.

Tuyen told VietnamNet the government has statistics about the use of ecstasy at karaoke bars, but the report gave no data.

“I’m sure the real number of cases is higher than in our statistics. Evils will not be prevented without banning dancing,” he was quoted as saying. “In our country, karaoke often goes with ecstasy and prostitution.”

Karaoke workers on Su Van Hanh street said ecstasy could be found in some clubs — but not theirs.

“Not all karaokes allow the use of ecstasy,” says Thanh, whose club targets middle to higher-class customers and charges about double the room rate of nearby singing clubs like Karaoke K-T.

“This is what we call ‘family karaoke’,” said Pham Ngoc Khanh, 40, a staffer at K-T.

He said the business, open for several years, has a loyal following of civil servants, students and workers.

“It is not karaoke with what we call ‘social evils’.”

Clubs in other parts of the city might be more prone to vice, he said.

“It’s not right to ban us from dancing in karaoke clubs,” said one K-T customer, who arrived with a laptop bag on his shoulder. “Maybe they should ban dance bars where they have prostitutes. If they just make a general ban on dancing in karaokes, it’s not reasonable.”

The customer declined to give his name.

Khanh, the K-T worker, said karaoke was a popular form of entertainment and a ban on dancing would be “a bit strange” for customers trying to relax.

Karaoke was introduced to Vietnam in the early 1990s. The bars are now found throughout the socially conservative nation, even in remote mountainous villages.

“It’s impossible” to ban dancing, says Dang Duc Han, standing in a T-shirt, his arms folded, outside the Karaoke 64 club he manages.

If people feel in the mood they will dance, Han says as customers ride up on their motorcycles, and a child with a toy bicycle brushes against his leg.

In 2006 Vietnam banned alcohol in karaoke bars — but in practice drinking continues — while a year earlier it stopped issuing licences for bars, karaoke parlours and dance halls.

Earlier draft legislation even called for karaoke clubs to be shut down, after Tuyen said many served as brothels.

In his interview with VietnamNet, Tuyen admitted inspectors were not able to check karaoke clubs very often and said “people themselves must obey the rules”.

Khanh, of Karaoke K-T, said officials have lost touch with reality.

“They have been sitting in a high position for quite some time,” he said. “They are not realistic.”

Ngo Thi Bao Ngoc, 28, a black-stockinged staffer at the Style club, said that as the number of karaokes proliferates, authorities have a hard time controlling them.

“They get confused and they don’t know how to deal with it,” she said.

Serious business owners will not want ecstasy on their premises because it damages their reputation while bringing no benefit, and banning dancing would not work, Ngoc said.

HANOI (AFP) — Authorities in the Vietnamese capital Hanoi have temporarily closed at least a dozen dog slaughterhouses on fears their unclean conditions may help spread cholera bacteria to people, an official said Monday.

Dog meat is a popular dish in Vietnam.

It was unclear when the slaughterhouses in Hanoi’s suburban Duong Noi would be allowed to resume operations, local official Nguyen Thi Thuc told AFP, without providing more details.

The health ministry said on its website that cholera bacteria had been found in the slaughterhouses.

Cholera is spread through unsafe food.

Eight northern cities and provinces are presently hit by outbreaks of acute diarrhoea, including hundreds of cases of suspected cholera, officials and press reports said.

Communist Vietnam has a longstanding problem with food safety and hygiene.

In March and April last year the country battled cholera outbreaks which hit Hanoi, Ho Chi Minh City and 16 other provinces. More than 100 people were infected but no fatalities were reported.

Cholera is an acute intestinal infection transmitted through water or food contaminated with the bacteria vibrio cholera. It causes diarrhoea and dehydration and can lead to kidney failure and death if untreated.